Analysts say that buying private clinics is the fastest way for companies to capitalise on populations that are becoming richer and seeking better care.

Healthcare companies in Singapore have been acquiring local clinics to
expand in the region's medical-care market. This has rewarded investors with
an average 50% gain in the past year and the companies are keen on continuing
this rally throughout the year.

Singapore Medical Group (SMG) for instance, has more than double since
last year August, when it acquired a radiology centre. It has also entered
into agreements to acquire two paediatric clinics recently – marking the
SMG's initial foray into a highly complementary specialist vertical. This
provides it cross-selling opportunities to its Obstetrics & Gynaecology
(O&G) segment.

Singapore O&G Ltd, which runs gynaecology centres on the other
hand, has surged 75% in the past 12 months. Both have helped an index of nine
medical-services providers worth less than a total of S$1 billion to triple
the benchmark Straits Times index.

Buying private clinics to
capitalise on medical tourism

In the last 12 months, at least 19 transactions have occurred,
involving acquisitions of clinics by publicly-traded companies in the city
states – twice as many as in 2015.

The deal count may rise for the rest of the year as more physicians
are selling their practises to larger providers of medical care, according to
DBS Group Research.

"There's still room for consolidation," said Ms Rachel Tan,
an analyst at DBS Group Research in Singapore. "With corporatisation,
doctors could look to leveraging the size and growth of a bigger medical
practice and potentially prolong their practice as they approach
retirement."

Analysts say that the fastest way for companies to capitalise on
populations that are becoming richer and seeking better care - such as
foreign patients – is through buying private clinics. While tourist arrivals
are expected to decline, the demand for high-end services from foreign patients is resilient.

"Most middle-to-upper class Indonesians go to Singapore for
treatment," remarked Mr Alan Richardson, a fund manager at Samsung Asset
Management, who holds shares in Singapore Medical Group and Singapore
O&G. "So the market is not just Singapore, but a 600-million
population catchment area that is Asean."

Doctors say it means better care
for patients

With such optimism surrounding the industry, stocks have risen in
prices. Singapore Medical Group and Singapore O&G trade at
price-to-earnings multiples that are more than double the local benchmark
index.

"It's an exciting story but sometimes integration is not
easy," said Mr Andrew Chow, head of research at United Overseas Bank.
"The game will continue for the next six to 12 months. We need to see
organic growth as well as a smooth integration a full year later."

As for doctors, Cathryn Chan, an obstetrician and gynaecologist at
Astra Women's Specialists that was bought over by Singapore Medical, there
was attraction in joining a hospital
system.

"When there are more doctors, more people in different
sub-specialties, patients are looked after well," she said. "And when
you decide to retire, there will be a second generation to take over." MIMS

Are overlapping surgeries putting patients at risk?
20 hours ago
A new study has added to the ever-increasing body of work that suggests patients of overlapping surgeries are more likely to suffer serious complications compared to surgeries in which the doctor focuses just on one patient. Nonetheless, is this study more credible?